Brazil at risk of sugar tariff as Argentina questions tariff-free wheat quota offered to the US

Brazil’s approval of a 750,000 ton tariff-free quota from the US, and possibly other non-Mercosur countries, is causing concern in the Argentine government which may retaliate with a sugar tariff. According to data in a Reuters report, of the total 6.8m tons of wheat imported by Brazil in 2018, Argentina supplied 5.9m tons. Most of the rest came from the US and from Paraguay. The tariff-free quota decision is a big blow to the wheat growers in Argentina’s Pampas farm belt. After vehicles, wheat is the second largest export commodity from Argentina to Brazil, which generated US$1.3bn in revenues last year. Consultancy firm Intel FCStone estimates that Brazil’s wheat harvest should reach a 3-year high of 6.6m tons in the 2019/20 season, and wheat imports should fall to 5.7m tons in the same season, compared to 7m tons in the 2018/19 crop year.

According to a government source cited by Reuters, Argentina is waiting for more clarification about the new import quota before asserting its right as a Mercosur member to appeal the decision in the Mercosur bloc’s court or even appeal to the WTO. Argentina sees no justification of the tariff free quota offered to the US since Brazil’s wheat production has increased in the recent past. Government officials have indicated that a tariff may be applied to Brazilian sugar in retaliation.

The following DataLiner graph shows Brazil’s top wheat import origins:

According to Reuters, Brazilian farmers have also flagged concerns about the tariff, “now there’s another 750,000 tonnes that will compete with national production,” said a wheat industry source in Parana.

Source:

https://www.portosenavios.com.br/noticias/geral/apos-cota-para-trigo-dos-eua-argentina-pode-rever-compra-de-acucar-brasileiro-sem-tarifa

https://www.portosenavios.com.br/noticias/geral/safra-de-trigo-do-brasil-pode-ser-a-maior-em-3-anos-diz-fcstone

https://www.reuters.com/article/us-usa-brazil-wheat/us-brazil-wheat-deal-worries-local-argentine-farmers-idUSKCN1R122O

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